ELOI PIETA Mayor of Guarulhos

The rise of the city of Guarulhos from financial ruin just six years ago to busting business hub today is remarkable

ElOi PietA looks a satisfied man as he surveys Guarulhos from the window of his mayoral office on a hill overlooking the Brazilian city. When he became mayor back in 2001, the city was in financial ruin. But six years on, Guarulhos’ accounts are now in shape to the extent that the city recently obtained an investment grade rating and companies are flocking to set up in this metropolis of 1.3 million people, which combines fantastic logistics and location with a robust infrastructure and improving standards of living.
“Guarulhos is expanding. It can offer things that our larger neighbor can’t,” says Pieta.

Guarulhos actually nestles right next to Sao Paulo, Brazil’s industrial and financial hub and one of the world’s largest conurbations, but does not suffer from the same apocalyptic traffic and sky-high rents of the state capital. For industrial firms in need of space and good logistics, that is a huge plus and the package gets better when you factor in that many of the main air and road routes out of Sao Paulo actually start in Guarulhos. It is home to Sao Paulo’s main airport, which caters for 13 million passengers a year and is also the starting point for the major highways that link Sao Paulo to Brazil’s other major cities, including Rio de Janeiro and Belo Horizonte. As if that was not enough, it is also within easy reach of Santos, Latin America’s biggest port.

The benefits of setting up in Guarulhos have attracted a vast array of industrial firms, ranging from autoparts and pharmaceutical manufacturers to food and service industries, creating a record number of job vacancies and a booming local economy.

“Guarulhos is located in the middle of an enormous Brazilian market, at the heart of a main industrial area. It is in a perfect place to produce,” underlines Pieta with enthusiasm. The city with the second largest GDP in the State of Sao Paulo is set to accelerate further.

Foreign investment in Guarulhos hit record levels in the first half of 2007, with tremendous interest in the airport services sector. The Guarulhos airport is already the largest airport in South America and is set to expand further in the next few years as the government plans to build a third runway and a third terminal on the site. In addition, a high-speed rail link between the airport and Sao Paulo is projected for the next decade. Boeing has already set up a school for pilots in Guarulhos, while major hotel chains have spotted the enormous opportunities in the area of business tourism.

“This area is expanding extremely quickly. We currently have 19 major hotels and a number of convention centers,” declares the mayor.

Meanwhile, the city government is investing heavily in infrastructure to meet both the expanding needs of its new industrial base and also of its population. Guarulhos is due to receive almost $250 million from the federal government as part of its PAC growth plan, which the city will use to continue to improve the water and sanitation systems, as well as shaping up the education system. The city is also starting to pump money into clearing slums and rejuvenating the town center.

Guarulhos can already boast one of the highest standards of living in the State of Sao Paulo, and with the prospects that the situation will improve further, the city is attracting qualified workers away from neighboring regions.

To ensure that the population gets the best out of the investments being made in Guarulhos, Pieta has placed a great deal of emphasis on dialogue, organizing assemblies for citizen participation in discussions on what improvements needed to be made in the city.

INVESTMENT GRADE. All this has been achieved while the government has managed to stick to a tight budget. Years of mismanagement took Guarulhos to the verge of bankruptcy in 1997 and 1998, and Pietá says he has had to juggle the need to balance the books with the pressing demands of investment to rejuvenate Guarulhos. “We had to ally fiscal conservatism with excellent public spending policies,” explains Pietá. Incredibly, the Guarulhos government managed to turn the situation around completely, achieving investment grade from Austin Rating in 2007.

Only two other cities, Rio de Janeiro and Belo Horizonte, have achieved an equivalent grade in Brazil, while Sao Paulo has yet to reach this level. This is a big advantage at a time when the country is enjoying a wave of foreign investment. The economy has stabilized after years of flux and institutional investors are seeking alternative opportunities in emerging markets. Most of these investors are seeking secure projects to pour their money into and Guarulhos’ almost unique position of having investment grade puts it at the head of the list of investment options. As Pieta notes, Guarulhos is a fantastic alternative to investing in Sao Paulo, with all the benefits of the big city but none of the headaches.